Geopolitical Tectonic Movements: Watch the Mediterranean & Beyond

Note: this entry was originally published in February 2015, with ongoing updates and edits since then. Though the daily ebbs and flows of the news cycle may make it seem like some of these issues – like the Greek debt crisis – have been resolved, in reality these are deep-seated problems that continue to simmer under the surface.

Italians have become very concerned [Corriere della Sera] about ISIS’ recent inroads into Libya, adding a new twist to a humanitarian crisis that has been going on for years [The Migrants Files]. Deutche Welle summarizes the situation in Lampedusa:

“The residents of the island are waiting and hoping that no war breaks out right at their doorstep. There are frightening new rumors that have found their way across the Mediterranean.

The Italian secret service is said to have worked out that more than 250,000 refugees currently living in camps in Libya are willing to risk the dangerous trip to Europe. Rumor has it that Islamist terrorists are forcing people to flee in order to cause chaos in Europe. With it comes the worry that terrorists are among the refugees flooding into the continent.”

Meanwhile Russia and China may be waiting for the right opportunity to bail out Greece in case that country actually exits the Euro, desperately seeking financial support anywhere it can get it. China’s COSCO made big investments [WSJ] in Greek port facilities, and Greece’s new government halting [AFP] of its privatization plans turned out to be temporary. A Chinese naval fleet paid a friendly visit [Xinhua] to the port just days ago, which no less than Greek prime minister Alexis Tsipras took the time to visit. To put day-to-day developments into perspective, here’s how the flow of global trade [map] looks like.

There’s also been talks [Hurriyet] of Cyprus allowing increased use of its naval and air facilities by Russia. Remember that Cyprus, where a lot of Russian money is parked, has been facing its own severe financial crisis fairly recently.

Now note that Russia and China announced [Interfax] in 2014 that they’d hold their first-ever joint naval exercise in the Mediterranean in the spring 2015. Russia’s ability to sustain naval forces in the region so far solely relies on access to their facilities in Tartus, Syria. The Russians reportedly evacuated [RT] that naval base in June 2013, though their defense ministry denied [Pravda] having done so. I’m eagerly awaiting to see how large and sustained this naval drill will be as a show of regional interest and projection ability from China and Russia, as well as a way for them to demonstrate very visibly that they are willing to cooperate right in the backyard of the Western world.

On the Black Sea, there have been concerns ever since Russia’s annexation of Crimea that they wouldn’t stop there, but also follow the Ukrainian coast from Mariupol to Kalanchak, and possibly all the way to Odessa then the Transnistria breakaway region in Moldova. There, a new pro-EU prime minister has just been appointed [Reuters]. Expect the young Chiril Gaburici to have his work cut out for him.

Overall, there is a strong confluence of interests and tensions at play in the same space and time. That doesn’t mean Russia and China will make a significant, let alone concerted and thorough, push into the region, but it seems certain they are gauging Europe’s lack of determination and probing for relatively cheap opportunities to step in and serve their military and economic interests in one swoop. Sounds very much like a “Balance of Power” approach from the Cold War, doesn’t it?

The FT thinks that the sums at stake are too large for an Eastern bailout to be credible. Yes, if you look at debts at full value in hard currency. But if there’s a Greece default and Euro exit, I’d say all bets are off, opening the door for deals paid in kind or in Renminbi, in the process showing the world that weakening and possibly displacing the US dollar and Euro as reserve currencies is more than talk.

The Russians might be tactical, but the Chinese are playing a long game and may well be satisfied by incremental progress such as having their currency become [East Asia Forum] part of IMF special drawing rights. In the meantime they’ll let the EU and IMF exhaust themselves, and countries like Greece, before throwing a lifeline. But wait until it’s over to say it’s over.

Europe has a weak underbelly, and the EU is doing preciously little to address these weaknesses, leaving already struggling nation states under a huge amount of pressure. Watch this sea, and watch what happens in places such as Lampedusa, Piraeus or Limassol!

Remember that for years mainstream politicians and media would have you believe that talks of any member of the Euro ever leaving the currency union were sheer lunacy or idiocy. Then all of a sudden this scenario is presented as a distinct possibility. Political, economic, and military alliances break down under pressure all the time, don’t let anyone tell you otherwise. This is not just Zero Hedge fringe talk. Instead, this is what history in the making looks like!

“Haftar visited a Russian aircraft carrier off the coast of Tobruk from where he held a video conference with Russian defence minister Sergey Shoigu. Italian State TV RAI reported that Haftar signed an agreement whereby Russia would build two military bases near Tobruk and Benghazi.”

2016

“There is clearly a connection between the refugee crisis and the elevated terror danger in Germany,” conservative lawmaker Stephan Mayer said after a closed-door briefing in parliament on the investigation.

08/17/16 – Russia ups the ante in Ukraine with eye on G20 [FT], quoting the ISW saying Russian tank drills took place in Transnistria on Aug. 8-9. They may target the final months of Obama’s second term as a good window of opportunity to make a deeper push into Ukraine. Putin likes to launch operations during Olympics, as Le Monde notes [in French].

One thing that drives a serious divide through the EU – and arguably through Britain – has been the uncoordinated and inefficient handling of Europe’s refugee crisis. The number of refugees arriving this year in Europe is lower as compared to 2015, however that is largely due to the closure of the Balkan route and the EU’s deal with Turkey, which effectively put Greece at the forefront of enforcement. The United Nations’ refugee agency (UNHCR) has called conditions in Greek camps “inhumane”. Some 3,000 refugees have drowned attempting to cross the Mediterranean this year, nearly 1,000 more than in 2015.

“In the span of four years, Cosco has quadrupled container traffic, to just under 3 million units a year. If all goes well, annual capacity will be expanded to 6.2 million containers in 2016. Together with Pier I, that would put it in the same league as Europe’s largest ports in Hamburg, Antwerp and Rotterdam.”

11/15/15 – ISIS’ attacks two days ago in Paris, unprecedented (in Western Europe) in their scale and organization, were predicted by savvy observers such as judge Marc Trevidic (for instance in this 09/30/15 JDD article, in French). It’s not yet certain whether one of the terrorists had spent some time in Syria. It seems very likely that other similar coordinated attacks will take place in Europe in the months to come.